Loss of Libya's oil helped sent crude to $100 a barrel, says OPEC secretary general
OPEC’s quota system has been weakened by the need to replace Libya’s lost oil, the group’s secretary general said after yesterday’s divided meeting.
“I don’t want to say it is dead,” Abdalla El Badri said on Thursday in Vienna, referring to the group’s overall production target. “It is there, but we have to see how to replace Libya.” The group pumped 28.9 million barrels of oil a day in May and “will keep the same production” in June.
The 12-member Organisation of Petroleum Exporting Countries failed on Wednesday to agree on production in what Saudi Oil Minister Ali Al Naimi said “was one of the worst meetings” ever.
Crude rose to more than $100 a barrel after the decision, and the July contract gained as much as 96 cents to $101.70 a barrel in electronic trading on the New York Mercantile Exchange today, reaching $101.26 at 1:51 pm London time.
Oil prices include a risk premium of $15 to $20 a barrel and were staying high due to speculators, El Badri told reporters at a World Economic Forum meeting. Some ministers in the group didn’t want to raise output because they are concerned global economic growth will stall, hurting oil demand and leaving excess supply in the market, he said.
“OPEC is divided on the decision, not as an organisation,” El Badri said. “Yesterday, the problem was about figures. Is there a call on OPEC of 2 million barrels a day or not? Do we have 3.9 percent economic growth or not? Uncertainty was the elephant in the room yesterday.”
Saudi Arabia, OPEC’s largest producer, together with Kuwait, Qatar and the UAE, proposed increasing group output by 1.5 million barrels a day to 30.3 million barrels. They were blocked by members including Iran and Venezuela, which warned of a “collapse” in prices.
OPEC announced its biggest-ever output cuts in December 2008 amid a collapse in global demand, capping production at 24.845 million barrels a day for all members except Iraq, which is exempt. The group’s compliance rate with those limits, which remained unchanged since it was introduced, was 69 percent in April, the group said on May 12.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.